Northern Offshore Reports Third Quarter and Nine Month 2013 Financial Results and Declares Dividend

News provided by

Nov 13, 2013, 06:30 ET

HOUSTON, Nov. 13, 2013 /PRNewswire/ --

Highlights
(All $ in USD)

Northern Offshore, Ltd. (Oslo Bors: NOF.OL) today reported net income for the three months ended September 30, 2013, of $2.7 million, or $0.01 per diluted share, on revenues of $42.6 million.
Generated $11.0 million of third quarter EBITDA.
Announced contracts for the construction of two jackup drilling rigs.
Contract awarded for Energy Endeavour.
Option exercised for the Energy Enhancer.
The company's directors have declared a dividend of $0.05 per share.

Management Comment

Gary W. Casswell, Northern Offshore's president and CEO, commented, "As announced in a recent press release, we have taken a significant step forward in the execution of our strategy to transform the company's asset base to a newer rig fleet by commencing the construction of two high specification jackups, with options for two more, capable of working in most geographic areas around the world outside of the North Sea. These units will be constructed in China at very competitive prices and will be fully equipped to handle the most demanding client requirements and drilling applications. We are confident that the successful execution of this asset renewal strategy will be to the long term benefit of all of our stakeholders.

Mr. Casswell went on to say, "Maersk Oil and Gas has renewed the contract on our jackup Energy Enhancer operating in Denmark for one year from July at significantly higher rates. Additionally, the jackup Energy Endeavor has recently commenced a seven month plus options contract for Wintershall in the Netherlands at North Sea market rates. With four of five units now under contract we expect to see improved cash flow going forward. And as always, we continue to focus on the safe operation of all of our units and providing a world class service to our clients."

Third Quarter Analysis

Net income for the three months ended September 30, 2013, was $2.7 million, or $0.01 per diluted share. This compares to net income of $17.8 million, or $0.12 per diluted share for the third quarter of 2012. Revenues for the third quarter of 2013 were $42.6 million, compared to $62.2 million for the third quarter of 2012.

For the nine months ended September 30, 2013, net income was $5.4 million, or $0.03 per diluted share. For the same period in the prior year, net income was $6.0 million, or $0.04 per diluted share. Revenues for the first nine months of 2013 were $128.1 million, compared to $134.0 million for the same period in 2012.

Revenues for the three months ended September 30, 2013, were lower than the same period of 2012, primarily because of a decrease in dayrate revenues from the drillship Energy Searcher and jackup Energy Endeavour due to lower utilization of these rigs as compared to the same period in the prior year. This decrease was partially offset by an increase in revenues from the jackup Energy Enhancer due to higher dayrates attributable to the exercise of the rig's first one-year option during the current quarter.

The tariff revenues from the Northern Producer averaged approximately $112,000 per day in the third quarter of 2013. The company expects pricing levels to remain stable and production to decrease slightly in the near term.

Drilling and production expenses for the third quarter of 2013 were $1.7 million higher as compared with the same period in 2012, primarily due to higher labor and maintenance costs, which were partially offset by a decrease in the idle costs of the drillship Energy Searcher.

Third quarter 2013 depreciation, general and administrative expenses, interest expense, amortization of deferred financing fees and other financial items were comparable to those of the same period in 2012.

As of November 11, 2013, the company had an outstanding credit facility balance of $22.0 million and a cash balance of $37.0 million.

The company's directors have declared a dividend of $0.05 per share, or approximately $8.2 million. Shareholders of record with the VPS on November 29, 2013, will be entitled to receive the dividend, which will be paid on or around December 16, 2013. The shares of the company will be trading ex-dividend from November 27, 2013.

Conference Call Information

Northern Offshore, Ltd. will conduct a teleconference with security analysts at 9 a.m. CT, November 14, 2013, to discuss the company's quarterly results. Individuals wishing to participate in the teleconference should call (866) 700-5192 (in the U.S.) or (617) 213-8833 (outside the U.S.) about five to ten minutes prior to the scheduled start time and refer to participant password 96790263.

The conference call also will be accessible by logging on to the company's website at http://www.northernoffshorelimited.com. After logging on, go to "Investor Relations" and select the conference call webcast.

About the Company

Northern Offshore, Ltd. is a Bermuda holding company which operates offshore oil and gas drilling units and one production vessel in various markets around the world, including the North Sea, the Indian Ocean and Southeast Asia. The company's fleet consists of four drilling units (a drillship, a semisubmersible and two jackup drilling rigs) and one floating production facility. More information on Northern Offshore, Ltd. may be found by visiting the company's website at http://www.northernoffshorelimited.com.

This announcement contains statements that reflect the company's expectations or predictions of the future. These statements are forward-looking statements. These forward-looking statements may include statements regarding earnings guidance, capital allocation strategy, the impact of activity levels, business performance, and other market and industry conditions. The company's actual results could differ materially from those reflected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company's regulatory filings. The company disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events or otherwise.

For further information, please contact:
Brian Hefty at (713) 739-7686,
or via email at [email protected]

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

		Three Months Ended September 30,		Nine Months Ended September 30,
*(Thousands of US Dollars, except per share amounts)*	Q2 2013	2013	2012	2013	2012
Revenues	44,116	42,556	62,173	128,086	134,036
Operating expenses:
Drilling and production	(29,370)	(28,703)	(26,999)	(88,152)	(91,122)
Depreciation	(7,828)	(8,036)	(8,055)	(23,801)	(26,704)
General & administrative	(2,032)	(2,083)	(1,727)	(6,127)	(5,354)
Total operating expenses	(39,230)	(38,822)	(36,781)	(118,080)	(123,180)
Operating income	4,886	3,734	25,392	10,006	10,856
Interest expense	(384)	(369)	(747)	(1,147)	(1,905)
Amortization of deferred financing fees	(122)	(123)	(123)	(366)	(389)
Other financial items	(1,054)	(795)	(295)	(1,380)	(489)
Total other expense	(1,560)	(1,287)	(1,165)	(2,893)	(2,783)
Income before taxes	3,326	2,447	24,227	7,113	8,073
Income taxes (expense)/benefit	(1,668)	230	(6,383)	(1,713)	(2,027)
Net income	1,658	2,677	17,844	5,400	6,046

Earnings per share (US$)
Basic	0.01	0.01	0.12	0.03	0.04
Diluted	0.01	0.01	0.12	0.03	0.04

Weighted average common shares (000's)
Basic	157,267	157,556	156,046	157,294	155,875
Diluted	157,281	157,556	156,046	157,351	155,875

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

*(Thousands of US Dollars)*	September 30, 2013	December 31, 2012
*Current assets*
Cash and cash equivalents	32,996	26,504
Restricted cash	1,000	-
Accounts receivable, net	23,769	29,386
Prepaid expenses	3,891	4,099
Deferred mobilization costs	1,227	2,209
Deferred insurance premium	2,662	1,869
Other current assets	1,505	1,711
Total current assets	67,050	65,778
*Noncurrent assets*
Property, plant & equipment, net	184,566	201,077
Restricted cash, net of current portion	5,436	5,436
Noncurrent deposit/escrow account	8,258	5,198
Deferred mobilization costs, net of current portion	675	1,596
Drydock costs, net of current portion	3,417	5,093
Other noncurrent assets	672	1,748
Total noncurrent assets	203,024	220,148
Total assets	270,074	285,926
*Current liabilities*
Accounts payable	10,419	13,377
Accrued expenses	18,073	13,131
Income taxes payable	248	933
Affiliated debt	22,000	22,000
Deferred revenue	-	2,062
Total current liabilities	50,740	51,503
*Shareholders' equity*
Share capital	40,969	40,122
Additional paid-in capital	174,150	170,985
Accumulated other comprehensive loss	(6,691)	(6,691)
Retained earnings	10,906	30,007
Total shareholders' equity	219,334	234,423
Total liabilities and shareholders' equity	270,074	285,926

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Cash Flows - (Unaudited)

	Nine months ended September 30,
*(Thousands of US Dollars)*	2013	2012
Cash flows from operating activities
Net income	5,400	6,046
*Adjustments to reconcile net income/(loss) to net cash*
*provided by operating activities:*
Stock-based compensation	4,392	3,003
Depreciation	23,801	26,704
Amortization of deferred financing fees	366	389
(Gain)/loss on disposal of assets	(155)	83

*Changes in operating assets and working capital*
Accounts receivable	5,617	1,480
Prepaid expenses	208	(1,575)
Deferred mobilization costs	1,903	(4,215)
Other current and noncurrent assets	2,663	(4,790)
Accounts payable	(4,468)	(9,162)
Other payable	-	4,450
Other accrued liabilities	2,662	(4,832)
Deferred revenue	(2,062)	(1,720)
Income taxes payable	(685)	(2,211)
Other, net	10	12
Net cash provided by operating activities	39,652	13,662

Cash flows from investing activities
Capital expenditures	(5,014)	(8,891)
Changes in restricted cash	(1,000)	(1,846)
Changes in noncurrent deposit/escrow account	(3,060)	(3,624)
Proceeds from disposal of assets, net	155	-
Net cash used in investing activities	(8,919)	(14,361)

Cash flows from financing activities
Proceeds from drawdown of revolver facility	-	24,564
Debt issuance costs	-	(405)
Payment for taxes on vested shares	(380)	(649)
Dividends paid	(23,861)	(15,451)
Net cash (used in)/provided by financing activities	(24,241)	8,059

Net changes in cash and cash equivalents	6,492	7,360
Cash and cash equivalents at beginning of period	26,504	10,601
Cash and cash equivalents at end of period	32,996	17,961

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	407	1,759
Interest	450	1,548

Significant non-cash transactions during the period for:
Accrued capital expenditures	2,286	1,440
Accrued dividends	639	573

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Unaudited)

				Accumulated
	Common		Additional	other
	shares	Share	paid-in	comprehensive	Retained
*(Thousands of US Dollars)*	('000)	capital	capital	loss	earnings	Total

Balance at December 31, 2011	158,184	39,546	168,583	(6,691)	34,855	236,293

Net income	-	-	-	-	6,046	6,046
Issuance of restricted stock	2,577	644	(644)	-	-	-
Payments for taxes on vested shares	-	-	(649)	-	-	(649)
Stock-based compensation	-	-	3,003	-	-	3,003
Common shares dividends	-	-	-	-	(16,024)	(16,024)
Balance at September 30, 2012	160,761	40,190	170,293	(6,691)	24,877	228,669

Balance at December 31, 2012	160,488	40,122	170,985	(6,691)	30,007	234,423

Net income	-	-	-	-	5,400	5,400
Issuance of restricted stock	3,389	847	(847)	-	-	-
Payments for taxes on vested shares	-	-	(380)	-	-	(380)
Stock-based compensation	-	-	4,392	-	-	4,392
Common shares dividends	-	-	-	-	(24,501)	(24,501)
Balance at September 30, 2013	163,877	40,969	174,150	(6,691)	10,906	219,334

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Results
(Unaudited)



		Three Months Ended		Nine Months Ended
		September 30,		September 30,
*(Thousands of US Dollars)*	Q2 2013	2013	2012	2013	2012

Net income (GAAP)	1,658	2,677	17,844	5,400	6,046

Add Back:
Net interest expense	506	492	870	1,513	2,294
Income taxes	1,668	(230)	6,383	1,713	2,027
Depreciation	7,828	8,036	8,055	23,801	26,704
Other financial items	1,054	795	295	1,380	489

Adjusted EBITDA (Non-GAAP)	12,714	11,770	33,447	33,807	37,560



Adjusted EBITDA is defined as Net Income before Interest, Taxes, Depreciation and Other Financial Items

NORTHERN OFFSHORE, LTD. and SUBSIDIARIES
Operating Statistics
(Unaudited)

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
	Q2 2013	2013	2012	2013	2012

Jackups (2)

Average rig utilization	92%	67%	100%	86%	70%
Operating days	167	123	184	470	381
Average revenue per day	115,839	133,480	101,756	116,513	90,686

Drillship (1)

Average rig utilization	0%	0%	98%	0%	82%
Operating days	0	0	90	0	225
Average revenue per day	0	0	186,194	0	201,977

Semisubmersible (1)

Average rig utilization	100%	100%	100%	100%	60%
Operating days	91	92	92	273	165
Average revenue per day	156,168	170,841	179,229	155,128	161,376

Total Drilling Rigs (4)

Average rig utilization	71%	58%	100%	68%	70%
Operating days	258	215	366	743	771
Average revenue per day	130,064	149,467	141,994	130,701	138,292

Floating Production Facility (1)

Days in period	91	92	92	273	274
Production days	91	92	92	273	274
Average bpd	19,109	18,643	18,250	18,676	16,437
Average tariff revenue per day	114,654	111,855	109,514	112,057	98,655
Average other revenue per day	1,390	1,415	1,387	1,404	1,391
Total average revenue per day	116,044	113,270	110,901	113,461	100,046


Note 1: Operating days represent actual days under contract.

Note 2: Costs which are reimbursed by the client are included in the average revenue per day calculation.

Note 3: Energy Exerter is excluded from calculation for the jackup fleet for 2012.